EXTRAEXTRA

National Bankruptcy: A Solution

Bankruptcy is a scary word. In fact, in the lexicon of the American prosperity gospel, it might as well by synonymous with death and eternal damnation. As part of our Keynesian casino economy, bankruptcy is no longer what it has been historically — a routine legal procedure designed to mediate the relationship of debtors and creditors after some failure to meet obligations.

But such a reasonable view assumes that solutions are the aim of bankruptcy proceedings, and that solutions are desirable. When you are stuck in an inherently corrupt system that's based not on productivity but debt creation, bankruptcy is not a solution to a limited problem, but a threat to the entire status quo. The solution to an unsustainable situation is fought against as a much ballyhooed catastrophic end:

We all know how strong that refusal was against the face of economic reality. But really, bankruptcy is the only chance for a city like Detroit to restore some semblance of civilization. What we should be asking is not how to prevent some form of bankruptcy, a growing inevitability on a national level, but rather what brought us to this point and what we want to follow.

Currently, the basic economic structure of society is that of the Ponzi scheme. From Social Security, a 'safety net' that will suddenly snap when pensioners outnumber workers, to Facebook, a time waster that pressures your investment of attention by the plea that 'everyone else is on it', the 21st century enterprise relies on the positioning of money and people to come out ahead in a zero-sum paper shuffle, rather than the creation of new value through genuine investment. From the boardroom of Goldman Sachs to the college classroom full of students paying a small fortune for a place in the their educational credential game, all the way up to the federal government, the philosophy of Bernie Madoff is in effect:

The real enemy to — and solution for — this financial game is bankruptcy. Bankruptcy is when the music stops, when someone is finally stuck with a real bill. It halts not just one set of transactions, but a whole network. This is why there is such a strong, unnatural aversion to bankruptcy in the most corrupt situations — like Detroit.

Bankruptcy is a concept developed in free countries, for the specific purpose of halting counterproductive activity. Remember, in the legal world, bankruptcy has always been a pretty routine procedure, like divorce. But now, when lenders, who have best positioned themselves to exploit this system of monetary flows, are assumed to hold no liability or responsibility for their actions, it becomes an enemy.

The financial meltdowns in 2008 could have been the dawn of our liberation; instead they were a pretext to doubledown on investments in institutions like the city of Detroit and Wall Street. If the banks had been allowed to go bankrupt, there would be no discussion of Goldman Sachs today; it wouldn't exist. If failed manufacturers like GM had been allowed to go bankrupt, who knows what innovative company might have bought its assets? If the rule of law had prevailed, we might not be facing an even bleaker future five years later.

This is not a radical idea, but one supported by centuries of prior European jurisprudence. Indeed, world leaders in actual enlightened democracies have no problem stating it with a degree of clarity totally absent from the endless cover-ups that pass as political discourse in the US:

Though aligned with the ideological left, President Grímsson is more of a capitalist than the fake conservatives that defend these banks as if they were capitalist institutions. He makes a very strong, and often overlooked, point when he shows that entities as unproductive as these banks, which needed state intervention to stay afloat, divert talent and attention into a black hole of sterile monetary manipulation. The absurd amount of time and effort devoted to high frequency trading is just one example of work that might pay well and contribute to the GDP on paper, but adds nothing to the actual wealth of anybody — including that of the banks that engage in it — as they too will find themselves in a hollowed out wasteland at the end of this financial shuffle.

Moreover, bankruptcy would have a profound psychological benefit, as it would mean a repudiation of every fake pretense of sustainability of the status quo that every American has to live with when they try to plan for the future to any extent. It would be a profound return to reality, a necessary reminder that corruption doesn't pay, a fresh opportunity for a land that once promised it in abundance.

National bankruptcy, meaning the bankruptcy, effective or declared, of all institutions, up to and including the federal government, is coming. Remember that this is not a new, distinct crisis, but the logical end of the path we have chosen. It could be the best thing that's happened in some time.

COMMENTS

Bankruptcy is not he 1st solution but last. The first step is to fix the systematic policy problem. Restore Glass-Stiegel, require higher capitalization of all financial institutions.

Reduce all taxes by more than 50%, eliminate punitive and vindictive taxes...such as estate tax, double or triple taxation. Reform government pay etc etc.....the list is very long.

Declaring bankruptcy and starting over in the same old business as usual is basically an exercise in futility. We must eliminate the concept of free lunch and the concept of punishing the producers in our society.